US First Lady Hillary Clinton on Saturday challenged Palestinian President Yasser Arafat to "step forward" on a lasting peace deal with Israel and backed President Bill Clinton's statements on moving the US embassy from Tel Aviv to Jerusalem.

As for moving the US embassy to Jerusalem, "I'd like to see that move made before the end of the year," said Hillary Clinton.

She is making a bid in the November US elections to win the Senate seat for New York State, where the Jewish vote that is at stake is a major one.

On Friday, President Clinton told Israeli television in an interview that he had "always wanted to move our embassy to West Jerusalem."

Such a move, which has been approved by Congress, would amount to US recognition that Israel's capital is Jerusalem, the holy city the Palestinians also want as their capital.

Clinton's comments angered the Palestinians and drew cries of dismay from the American Committee on Jerusalem, which said in a statement the move threatened to preempt ongoing negotiations over the final status of Jerusalem – WASHINGTON (AFP)